Technology transfer (T2) agreements within the U.S. armed services can have significant benefits in the civilian sector, especially for small, entrepreneurial start-up companies that often are the backbone for innovation and economic growth.
That's according to a new economic impact study done for the U.S. Department of the Navy by the Indiana Business Research Center (IBRC) at Indiana University's Kelley School of Business.
The Navy's Technology Transfer Program Office has 37 facilities in 14 states and the District of Columbia. From 2005 through 2009, there were more than 620 agreements with naval laboratories. They include 10 research sites in California, seven locations in Maryland, four sites in Virginia and three locations in Florida and the District of Columbia.
They also include the Naval Surface Warfare Center, Crane Division, which is located 25 miles southwest of Bloomington and is home to about 4,000 researchers and technicians engaged in procuring and upgrading a wide variety of military munitions, weapons, communications and radar equipment.
Working with a subset of 103 agreements, the report found that these naval technology transfer deals were directly responsible for 670 well-paying civilian jobs at private firms, universities and non-profits nationally. When additional employment created through economic ripple effects is taken into account, naval technology transfer agreements are responsible for supporting more than 2,600 civilian jobs.
Compared to the U.S. average compensation per worker of $56,100, the direct T2 compensation per full-time job averaged $79,300 per year. Private companies accounted for 84 percent of all the agreements.
The federal, state and local taxes generated by this economic activity are estimated to total $60 million, averaging nearly $614,000 per agreement.
"This report not only shows the value of technology transfer for our troops in the field, such as better equipment and support, but also in the civilian environment as well," said Timothy Slaper, director of economic analysis at the IBRC and author of the study. "These agreements often generate jobs that are linked to the lab where they have agreements.
"The product license agreements (PLAs) are for firms selling products that are based on technologies that were developed in military labs," Slaper said, adding that some of the technology originally developed for the military also is used to benefit all Americans. "You and I are not going to hit an IED and suffer severe medical problems, but there obviously are civilian applications for medical products and procedures they the labs might develop."
The study, "The Economic Contribution of the Department of the Navy Technology Transfer Program," found that two-thirds of the agreement partners that participated in the survey were small, with fewer than 100 employees.
More than half of the small T2 partners reported that, on average, 12 jobs were created or retained as a result of their agreements, highlighting the effect that such deals can have on start-up companies.
"That's really the story," Slaper said. "Any one of these companies is not a ribbon-cutting ceremony like getting a Honda plant or having a Boeing relocate in your community, but one needs to consider that these smaller firms, which tend to be entrepreneurial and technologically cutting edge, tend to spur economic growth and generate more jobs overall.
"Cooperative research agreements between labs and partner organizations can help move technologies from early developmental stages to products that are ready for the market. These agreements can multiply the modest resources of small firms and will likely result in innovative products and processes later on down the road that will, in turn generate economy activity and jobs," he said.
The estimated direct economic output associated with these 103 agreements totaled $200 million and the economic ripple effect of this output generated an estimated $345 million in additional economic activity. The total economic impact of the 103 T2 deals for the civilian economy totaled over a half-billion dollars (in 2009 dollars).
Among other findings:
- Of the 103 deals considered in the report, 64 percent were cooperative research and development agreements (CRADAs) and 30 percent were product license agreements (PLAs), with the balance consisting of limited purpose-CRADAs (LP-CRADAs). On average, a CRADA supported over eight jobs while a PLA, on average, supported 10 jobs.
- Within the manufacturing sector, no one particular industry dominated. However, within the professional, scientific and technical services sector, nearly two-thirds of the partner firms are in the scientific research and development services industry. The majority of the partner firms in the scientific R&D services industry are located in California or Maryland, with their neighboring states in the West and Mideast also dominating the U.S. R&D landscape.
- Medium-sized agreement partners took the shortest amount of time to develop their technology and also experienced the largest increase in the technology readiness levels.
- Small deal partners had relatively minor increases in expenses associated with the agreements, yet more than half (55 percent) either expected or experienced increases in revenue averaging $2.9 million. Conversely, the expenses associated with agreements with large partners averaged $1.1 million, but they expected or experienced relatively modest increases in average annual gross revenue, little over a half million dollars.
The estimated economic impact presented in the report applies only to the agreement partners that participated in the study. The economic footprint of the 103 deals cannot be considered averages for all Department of Defense T2 agreements or agreement partners.
More information about the Indiana Business Research Center is available at http://www.ibrc.indiana.edu/.
